In the Forex market, there are many different types of orders that traders use to manage their trades. Among them, there are several common order types that all brokers accept.
In this article, we will learn about the main Forex trading orders and how to use them in the market.
What is a market order?
A market order is perhaps the most basic one. Often traders will learn this type of order first. As implied by the name, market orders are traded on the market. This means that if you want to enter the Forex market immediately, you can open a market order at the current price.
Usually, daily investors and traders rely on market orders to enter and exit the market quickly according to the strategy.
For example, The GBP/USD transaction table below shows the live prices for buying and selling. A market order to buy at 1.30125 will be executed immediately at the current price. The same applies to a sell order.
Types of pending orders in Forex trading
The next most popular type of FX order is a pending order. These types of orders help you to place pending orders away from the current market price. If the market price reaches the price you set earlier, pending orders are automatically opened on the market. There are many benefits to trading pending orders, including not having to sit in front of a computer to execute your trades!
Typically, pending orders in Forex can be used for breakout points or with other strategies that require execution when the price crosses a certain point.
- Buy limit: pending buy orders below the current price.
For example, First, place a limit order to get a better price. If the XAU/USD is at 1911, but you think the price will drop to 1900 before going up, you will place a limit order to buy at 1900 aka a Buy limit order.
- Sell limit: pending sell orders above the current price.
For example, If the XAU/USD is at 1911, but you think the price will rise up to 1920 before going down, you will place a limit order to sell at 1920 aka a Sell limit order.
- Buy stop: pending buy orders above the current price.
For example, The XAU/USD is at 1911. You think that if the price rises above 1915, it will continue to rise sharply. So now, you place a pending order to buy at the price of 1915 aka a Buy stop order.
- Sell stop: pending buy orders below the current price.
For example, The XAU/USD is at 1911. You think that if the price drops down to 1900, it will continue to plummet. Then, you will place a pending order to sell at the price of 1900 aka a Sell stop order.
Stop-loss and take-profit orders
You can set the Stop-loss and Take-profit orders for all buy/sell orders in the market.
This is an order that automatically exits when the price reaches a certain level of loss that has been set before.
Setting a stop-loss helps you to manage the risk amount of each trade. As a result, you will avoid heavy losses to your account.
This is a very important order which is indispensable in trading
This is an order that automatically exits when the price reaches a certain level of profit that has been set before.
Setting a take-profit helps you to manage the percentage of money to earn and the amount to lose (stop-loss). From there, you may have a trading strategy to allocate the volume accordingly.
The last line
The meaning and usage of the order types in the market sound simple. However, you need a lot of practice to use it well. This is because of psychological pressure during trading which can cause you to confuse among orders.
Prepare yourself with the most solid knowledge and skills before starting to trade.